Leadership in the high performance...

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Scientific review article ∗ UDK 316.343-057.177:65.018.2

Slobodan Adžić∗∗

Jelena Lazić ∗∗∗ Janko M. Cvijanović ∗∗∗

Leadership in the high performance organization

Summary: The distribution of knowledge and creativity, namely decision making, in industrial model are based on the philosophy that knowledge and creativity are concentrated mainly on the top of organization, that the top-level managers are experts and they know the best which decisions are to be made, without consulting lower levels in the organization. In the HPO model the knowledge and creativity are widely distributed through the organization, those closest to people holding functions know the best how they see them and how they improve them, while consulting is necessary to reach the best decisions.

Keywords: Leader, high performance organization (HPO), creative cooperation Rezime: Distribucija znanja i kreativnosti, odnosno donošenje odluka, u industrijskom modelu su se bazirali na filozofiji da su znanje i kreativnost koncentrisani uglavnom na vrhu organizacije, da su vrhovni menadžeri eksperti i da oni najbolje znaju koje odluke su potrebne da se donesu, bez konsultacija sa nižim nivoima u organizaciji. U OVP modelu znanje i kreativnost su široko rasprostranjeni kroz organizaciju, oni najbliži funkcijama najbolje znaju kako da ih vode i da ih unapređuju, konsultacije su neophodne da bi se došlo do najboljih odluka. Ključne reči: Vođa, preduzeće visokih performansi, kreativna saradnja

1. PHILOSOPHY OF LEADERSHIP

he questions to be answered are:

1. What does an organization, a system within the organization, believe (with relation to people) the nature of people and their relation towards the job is?

2. What do we believe the primary source of motivation of most ∗ The paper was accepted on 17 November 2005. and has been with autors for tree

revision ∗∗ MBA, Pančevo ∗∗∗ Ekonomski institut, Beograd, e-mail: [email protected]

T

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46

people is? 3. What is the relation towards the distribution of knowledge and knowlwdge

and creativity and, therefore, how the decision are made? 4. What do we believe the job nature is?

As for the nature of people and their relation towards the job, the autocrat leadership philosophy is based on a presumption that people like to work, that they are not ambitious and they do not want to be responsible. The coercion and control are necessary in order to perform a job. The new philosophy is based on an presumption that the work is primeval man’s need, that people want to be a part of something important and on equal footing. Self-control is more effective than external control.

As for primary source of motivation, the old philosophy is based on Maslow’s lower levels of needs and Hertzberg’s hygienic factors respectively. The democratic leadership philosophy sees the motivation sources in Maslow’s high levels of needs and in Hertzberg’s motivators respectively.

The distribution of knowledge and creativity, namely decision making, in industrial model are based on the philosophy that knowledge and creativity are concentrated mainly on the top of organization, that the top-level managers are experts and they know the best which decisions are to be made, without consulting lower levels in the organization. In the network talent model the knowledge and creativity are widely distributed through the organization, those closest to people holding functions know the best how they see them and how they improve them, while consulting is necessary to reach the best decisions.

Related to the job nature, the old philosophy is based on presumption that the job is best done if divided into simplified tasks, where management is obliged to unite them. The work is what an individual does by alone, the award is based on competition between the workers. The new philosophy is based on presumption that the job has surpassed the individual and the network of educated and stimulated collaborators is required for the task to be performed. The award is based on cooperative team performances.

The research of motivation in the HPO model is based on works of Maslow, Hertzberg and Emery. These authors have recognized two kinds of employee’s motivation factors:

• Motivators: factors related to business satisfaction and motivations, and • Hygienic factors: appropriate level of these factors may prevent

dissatisfaction, but they alone are not “motivators”. Maslow (see [12]) is known by studying motives and needs they satisfy.

The motivators for Maslow are: (1) development (self-actualization), (2) respect (Ego-status)

while hygienic factor for Maslow are: (1) belonging, (2) security, (3) basic survival.

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Hertzberg has studied goals and goal stimulation. The motivators for Hertzberg (see [10]) are: interesting and demanding jobs, responsibility, achievement, recognizing, professional growth, promotion to higher levels, while hygienic factors for him are: wages and allowances, feeling of security, interpersonal relations, status, working conditions, quality of control, organizational policy and fair administration.

The Emery’s field of study is a job design. The job motivators according Emery (see [9]) are the following: diversity and challenges, decision making, feedback and learning, mutual support and respect, feeling of comprehensiveness, possibility of growth, while hygienic factors are: honest and adequate salary, job security, allowances, security, health, process of recognizing.

The most important authors whose works are the basis for designing HPO model in the leadership philosophy are McGregor , Block, and Likert.

The theory X and theory Y by McGregor (see [13]) have been the basis for the development of behavioral science. He alone has believed that the Y model is appropriate for most of the people.

According to the X theory:

• Work is for most people mostly unpleasant. • Many people are not ambitious, have little desire for responsibility and want

to be directed. • Many people have little competencies for solving organizational problems. • The motivation is based on physical needs and need for security (according

Maslov). • Many people must be directly controlled and must often be under coercion

in order to accomplish organization’s objectives. According to the Y theory:

• Work is a natural game, if the conditions are favorable. • Self-control is often necessary in achieving organizational objectives. • Competency for solving organizational problems is widely represented in

population. • Motivation is based on social needs, self-respect and self-actualization just

like it is based on physical needs and need for security. • The people are not to be managed. They may be creative if adequately

motivated.

It is obvious that the HPO model and democratic network talent organization are based on the Y theory.

Block (see [2]) dealt with the so-called cycles and his studies has brought about bureaucratic and entrepreneurial cycle. They are in opposite poles. The Block’s entrepreneurial cycle has coincided with the democratic leadership philosophy:

The entrepreneurial contract sees that:


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◊ each person has authority; individuals are responsible for their actions and for organization’s success; the management is focused on the purpose of organization and helps in creating culture,

◊ self-expressing is necessary to free human energy, passion and motivation,

◊ vision and values are the basis for responsible actions of individuals, ◊ people are loyal to the organization because they want, and not

because they have to. ◊

Enlightened self-interest:

◊ success is defined as giving contribution, working something important, being helpful to the colleagues and customers, integrity is of primary, while awards are of secondary importance.

Authentic tactics:

◊ communication is direct and honest; information and control are divided; people have feeling of belonging.

Autonomy:

◊ we feel that our existence is in our hands; we undertake responsibility for our situation and for the future.

The block’s bureaucratic cycle is related to the authoritative organization, formally and strictly worn out and inflexible in terms of hierarchy:

Patriarchal contract requires:

◊ subordination to higher authority; the top-level knows better; the management is autocratic, control is centralized; hierarchy

◊ impossibility of self-expressing; be careful, ◊ sacrificing for the benefit of unknown award in the future, ◊ anticipated disloyalty towards the contract.

Short-sighted self interest:

◊ success is defined as gaining personal benefit – advancement, authority, benefit and “corporate jewellery”.

Manipulative tactics:

◊ autocratic cultures and personal ambition support selfish, careful and indirect behavior; manipulative; based on control of people.

• Depencence: ◊ we feel that our existence is in hands of others; our situation depends on

decisions of others and their relation towards us.


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However, the best theoretical and practical value is found in Likert’s (see [11]) organizational system having four basic and one “gemischt” systems which may even not be called a system:

1. Exploitative autocratic, 2. Voluntary autocratic, 3. Consultative, 4. Participative. 5. Laissez faire (zero system)

* Adapted from * Adapted from RensisRensis Likert, Likert, The Human OrganizationThe Human Organization, (New York: McGraw, (New York: McGraw--Hill, 1967)Hill, 1967)** Adapted from Marvin Weisbord, ** Adapted from Marvin Weisbord, ““Why Organizational Development HasnWhy Organizational Development Hasn’’t Worked (So Far) t Worked (So Far)

in Medical Centersin Medical Centers”” Health Care Management ReviewHealth Care Management Review (Spring, 1976).(Spring, 1976).

SYSTEM SYSTEM ““ZEROZERO””****

(Laissez Faire)(Laissez Faire)

Higher LevelHigher Level(comes from (comes from outside org.)outside org.)

Mixed (but mostly Mixed (but mostly within tech. within tech.

areas)areas)

MixedMixed(but mostly on (but mostly on

technical issues)technical issues)

MixedMixed(often avoided) (often avoided)

MixedMixed(sometimes not (sometimes not

set at all)set at all)

MixedMixed(positive toward (positive toward job but not org.)job but not org.)

MixedMixed(poor to good)(poor to good)

SYSTEM 1SYSTEM 1(Exploitative(ExploitativeAutocratic)Autocratic)

SecuritySecurityMoneyMoney

NoneNone

DownDownOnlyOnly

Boss AloneBoss Alone

Top DownTop Down

HostileHostile

MediocreMediocre

SYSTEM 2SYSTEM 2(Benevolent(BenevolentAutocratic)Autocratic)

StatusStatus

LittleLittle

MostlyMostlyDownDown

Boss Mostly, Boss Mostly, Some Some

Technical at 1Technical at 1stst

LevelLevel

Top DownTop Down

MixedMixed(toward (toward

negative)negative)

Fair to Fair to GoodGood

SYSTEM 3SYSTEM 3(Consultative)(Consultative)

GrowthGrowthRecognitionRecognition

SomeSome

UpUpandand

DownDown

Boss Focused: Boss Focused: Asks, Decides, Asks, Decides,

ExplainsExplains

At Top, withAt Top, withConsultationConsultation

MixedMixed(toward(towardpositive)positive)

Good to Good to ExcellentExcellent

SYSTEM 4SYSTEM 4(Participative)(Participative)

IdentityIdentityAchievementAchievement

InfluenceInfluence

MuchMuch

Up, Down, Up, Down, andand

SidewaysSideways

Team BasedTeam Based

Group Group Participation Participation

FavorableFavorable

ExcellentExcellent

EMPLOYEEEMPLOYEEMOTIVATIONMOTIVATION

TEAMWORKTEAMWORK

COMMUNICOMMUNI--CATIONCATION

DECISIONDECISIONMAKINGMAKING

GOALS SET GOALS SET

EMPLOYEE EMPLOYEE ATTITUDESATTITUDES

OUTPUTOUTPUT

LIKERT’S ORGANIZATIONAL “SYSTEMS”*LIKERTLIKERT’’S ORGANIZATIONAL S ORGANIZATIONAL ““SYSTEMSSYSTEMS””**

Source [14]

Figure 1. - Table of Likert’s organizational systems

The zero system is called a system because it contains mixture of everything: one element operates at the level of consultative organization (say communicates), while the other is based on authoritative organization system (say the team work). In such cases we have the “sickest” organization.

In the first, exploitative system, the philosophy is based on the following: people are seen as being lazy and selfish, while the policy of the organization is exploiting. The people are motivated with fear to loose a job or salary. Knowledge, competencies and creativity are concentrated in hands of top-level managers. The work is strictly controlled, every 6-8 workers have supervisor, every 6 – 8 supervisors have a manager, hierarchy is highly explicit. The relation


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between the manager and workers is similar to the one of slaveholder and slave, a worker is not important for existence of the organization.

In the other, voluntary autocratic system, the philosophy is based on the following: the people are seen similarly as in the first system, however, the policy is not exploiting. The people are motivated, besides the fear and salary, also by their status in the organization. This organization usually has a lot of advancing levels and a lot of high-sounding titles. The knowledge, competency and creativity are still concentrated on the top-level, however, confidence in knowledge of some technical collaborators is shown. The work is broken into a number of assignments, with a manager being obliged to ignore them. The relation between a manager and a worker is similar to the boss and servant relation, namely is based on distrust.

In the third, consultative system, the philosophy is based on the following: people are desirable, even needed for good jobs to run. Well dressed, they will accomplish their assignments well and without external control. When the “hygiene” factors are met the motivation derives from the job – high demands, growth, acknowledgement and contribution. The knowledge, competencies and creativity are widely represented in the organization, the management has no answer to all questions, so that consultation is a standard for decision making. The work is considered as a complex process, and the management is responsible for creating organization’s culture. The relation between managers and workers is the relation of an adult towards another adult.

In the fourth, participative system, the philosophy is based on the following: people have status as in the third system. When “hygiene” factors are met the motivation derives from jobs – demand, growth, acknowledgement and contribution. The people are considered as being broadly trained and creative, so the job of a manager is transferred into assignments of a team, which naturally has the leader’s and manager’s role. The work is considered as being complex, the teams are responsible for technical, manager’s and leader’s performances. The relation between manager and worker is the relation between an adult towards another adult, while the job of leader is training and equalizing.

The practical value of this model is in that the upper systems are the basis for examining organization - in which system it actually is. The less consultative organization should represent a benchmark for the HPO organization, and it is desirable for it to gradually get changed in order to adopt philosophy and standards of a participative organization. Based on leader’s assessment it is estimated to which system the organization belongs, or, if the answers are dispersed in various systems, then such organization belongs to the zero system, which could not be called an organized system but a mixture of everything. The zero system is convincingly the system with lowest performances. Also, leaders answer to the question in which organization they would like to work, by which their competency to lead participative or consultative system is tested. It should be mentioned that the fourth system is still rare in the very United States. Besides assessment by leaders, the


51

assessment by collaborators is also carried out – assessment of the existing and desired system.

2. LEADERSHIP FUNCTIONS The leadership functions are focused on “leadership job”, namely on wath a leader actually does. The leadership necessary for the HPO model is the leadership represented at all levels in an organization, each worker must contribute to leadership functions for an organization to be successful. The function of a leader is to find in each job the right answers per the following items:

• Strategic consumer’s value analysis (SCVA) • Vision/Values Strategy/Structure/System • Integration of suprasystems/Stewardship relations • Knowledge/Opinion/Change/Renewal • Enable/Train/Incourage

Strategic consumer’s value analysis should give answer to the following question:

1. Who are and who should be our buyers and consumers? 2. What do they appraise (want/need/expect) now and what will they appraise

in future? 3. Who are our competitors and how do they affect us? 4. What is happening in the environment and how this can affect us?

The linkage of vision and values with the strategy, structure and system should enable awareness of the following answers:

1. What are the high performances for us, which are the higher moral values we serve and what is for us the desired future of the organization’s higher levels?

2. Are visions and common values for a business unit defined and applied, are they harmonized with visions and values of organization’s higher levels?

3. Strategic thinking: does the interaction between the mission/niche analysis and “business theory” result in strategic plan and are the operational plans based on it which result in increase of performances elaborated?

4. Do the values of business unit/organization allow the values (leadership philosophy, individual values, operative system values) to be action values (focused on the necessary and forbidden behavior) in order to be incorporated in the business culture?

Integrating Super-systems and stewardship relation understand the following:

1. Tighter linking of organizational parts into togetherness to allow the realization of a vision.


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2. Stewardship role is required from an individual, to serve togetherness. One should act as a “host of a whole” and not as an “owner of a part”.

Knowledge, opinion, change and renewal represent:

1. Personal learning, renewal, growth and change; demanding and using personal feedback.

2. Be on the “edge” of new knowledge both personally and organizationally, build up the organization of learning.

3. Using the best experiences from the practice, continual improvement.

Empowering and aligning are rather crucial words in philosophy but also in leadership functioning. But one should be careful and know that if an incompetent person is empowered, then bad decisions will be made faster.

There are four levels of knowledge and a leader should reach the last one for his knowledge to become distinctive. Although according to our system (and according the adopted Chinese system respectively) the highest degree of learning is I know that I know, such relation is not applied in this model. A leader is a “spoiler”, always throwing system out of its axes and setting new direction and discovering new possibilities. To succeed in this, he must be a complete person, however in such way that his knowledge and experience determine the direction:

THE FOUR STAGES OF LEARNINGTHE FOUR STAGES OF LEARNINGTHE FOUR STAGES OF LEARNING

Unconscious CompetenceUnconscious Competence““dondon’’t know you knowt know you know””

Unconscious IncompetenceUnconscious Incompetence““dondon’’t know you dont know you don’’t knowt know””

ENVENVShiftShift “Jerkophobia”

Conscious IncompetenceConscious Incompetence““know you donknow you don’’t knowt know””

Conscious CompetenceConscious Competence““know you knowknow you know””

LEADERSHIP FUNCTIONSLEADERSHIP FUNCTIONSLEADERSHIP FUNCTIONS

Source [14]

Figure 2. - Four knowledge levels Leader’s functions – enable, empower, encourage – for a leader means to:


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1. Be a teacher and mentor, the bureaucratic behavior has to be cut off in its root.

2. Ensure necessary knowledge, skills and information for making good decisions.

3. Be provocative. 4. Remove barriers for empowering collaborators.

To answer why the leader’s functions in many organizations are not performed, we will use the well-known time control matrix:

QI QIIQIVQIII

LeadershipTask / Management

Management \ Task

Mor

eM

ore

Sign

ifica

ntSi

gnifi

cant

CONSEQUENCES DELIVEREDCONSEQUENCES DELIVERED

IMPA

CT

OF

IMPA

CT

OF

CO

NSE

QU

ENC

ESC

ON

SEQ

UEN

CES

Less

Le

ss

Sign

ifica

ntSi

gnifi

cant

LongerLonger--termtermNearNear--termterm

Eliminate unneeded Eliminate unneeded QIII and QIV work QIII and QIV work to gain time for QIIto gain time for QII

LEADERSHIP FUNCTIONSWHY LEADERSHIP FUNCTIONS ARE NOT GETTING DONE IN MOST ORGANIZATIONS

LEADERSHIP FUNCTIONSLEADERSHIP FUNCTIONSWHY LEADERSHIP FUNCTIONS ARE NOT GETTING DONE IN MOST ORGANIZATIWHY LEADERSHIP FUNCTIONS ARE NOT GETTING DONE IN MOST ORGANIZATIONSONS

Source [14]

Figure 3. - HPO leader’s job square Therefore, an HPO leader should “spend” most of his time working in the KII square, the square in which important jobs but less urgent ones are performed such as defining vision and values draft, so important for a high performance organization.

3. LEADERSHIP FORMS

Transiting form the organization of problem solving of autocratic style, led by a group of several individuals, to the organization of participative style, leading by a team, takes place at each level of organizational mechanism. In the HPO model this is defined as a leadership form.

The activities include building collective leadership mentality, presupposing responsibility for merging organizational units in a whole, as well as creating “parallel organizational structures” where the strategic reasoning and leader’s job may be performed rather than in hierarchically founded organization.


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For leadership form we ask ourselves the following question:

• Does a unit/organization have an organizational “mechanism of changes” to ensure that the Knowledge/Opinion/Change/Renewal appear at all levels (parallel organization)?

• Does a unit/organization have a good balance between the “reasoning” and “behavior” at all of its levels?

The goal is to change a form, to move towards building parallel organization, which will be more appropriate to the present-day conditions of changes in an environment. We have already been acquainted with the desired form of parallel organization, and that is a network talent model.

In designing an HPO we first deal with a procedure of how we can, out of initial system of organization according to Likert, come to the effective last participative system S4. Organizations in the initial authoritative systems S1 and S2 have strong and stratified organizational pyramid. The relation between the superiors and subordinates is identical to the relation between parents and children. Personal interests prevail over collective ones. The executives deal mostly with urgent jobs (squares KI and KIII in the time control matrix). The HPO tends to be in the system S4, to be an organization with leader’s teams at all levels.

A leader’s team is defined as a team of collaborators gathered together because of a permanent or temporary job within an organization, and all team members have equal rights and responsibilities. Each team member is as valuable as any other member. Equal importance of all in the team and their “being” in leader square KII still does not exclude a hierarchy. The hierarchy is the first and only then empowering and alignment. The leader team has an assignment to use potential of all team members to the maximum.

PAR

AL

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L O

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NPA

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ParentParent

““MyMy””Parent / Parent / ChildChild

Parent / Parent / ChildChild

ChildChildSS44

NOG Management /NOG Management /Task TeamTask Team SS3+3+

NOG NOG LeadershipLeadership

TeamTeam

PARALLEL ORGANIZATIONPARALLEL ORGANIZATION

SCVASCVAVV\\V SSSV SSSIntegrationIntegrationLL\\TT\\CC\\RREEEEEE

SS44 (Adult (Adult -- Adult)Adult)

QII QII -- -- LeadershipLeadershipQI, QIIIQI, QIII

(Parent / Child)(Parent / Child)SS11 / S/ S22

HIERARCHYHIERARCHY

-- --““UrgenciesUrgencies”” Task /Mgt.Task /Mgt.

LEADERSHIP FORMLEADERSHIP FORMLEADERSHIP FORM

Source [14]

Figure 4. - Hierarchic and Parallel Organization


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Forming HPO may be a long-lasting procedure. It is important to know that systems may not be jumped over and then to proceed to the last one immediately. In order to reach system S4 it is important to be (and probably for a long time) in the system S3. It should be always kept in mind that S4 is the final aim, and when we have such approach we can say that we are in the system S3+.

Therefore, teams are gradually formed, which are indoctrinated with leadership and which, still insisting on the management philosophy, become S3 – the consulting teams. Visions and adopted values, along with new effectiveness, which a team accomplishes, condition the transition of the team from S3 into S3+ form. This form is excellent, because it is necessary for all teams to reach this form so that afterwards the whole organization would come into S4 – the organizing form and participative phase.

PAR

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Management Management TeamTeam

LeadershipLeadershipTeamTeam

““MyMy””

SS44

““OurOur””


QI, QIIIQI, QIII -- --““UrgenciesUrgencies”” Task /Mgt.Task /Mgt.


QII QII -- -- LeadershipLeadership

(Parent / Child)(Parent / Child)SS11 / S/ S22 SS33++

(Adult (Adult -- Adult)Adult)

HIERARCHYHIERARCHY

SS33++

LEADERSHIP FORMLEADERSHIPLEADERSHIP FORMFORMPARALLEL ORGANIZATIONPARALLEL ORGANIZATION

Source [14]

Figure 5. - Management Leader’s Team

The indoctrination with leadership should start from the top level, because the first leader’s team required for creating HPO is a managing leader’s team:

After establishing an effective leader’s team on top level, it is necessary to form teams for particular projects, out of workers at various levels in the organization who have special expert knowledge, by taking into consideration psychological type of a person. The project management based on mission niche is a suggested approach.


56

SS33++

PAR

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ProjectProjectManagement Management

TeamTeamProjectProject

LeadershipLeadershipTeamTeamSS44

teamteamleaderleader







HIERARCHYHIERARCHY

SS44

LEADERSHIP FORMLEADERSHIP FORMLEADERSHIP FORMPARALLEL ORGANIZATIONPARALLEL ORGANIZATION

Source [14]

Figure 6. - Project leader’s team

Instructions as how to behave within the parallel organization are:

• The “normal” hierarchic organization rules are abolished, all team members are equal in a parallel organization, the decisions rare made by consensus.

• The focus is on achieving the best solution for the team as a whole, the team members have to be dedicated to the organizational visions and values.

• All get “promotion”, each team member has to “promote” himself for two levels, in order to have a sense of entirety, the sense of associate owner of the organization.

• The regenerating culture is critical: relationships based on confidence, honesty and respect.

• Confidentiality – is often necessary, because of an open atmosphere, a rule should be established according to which out of team only decisions will be made public, and not what someone said.

• There is no retaliation because of decisions made, but because of non-observance of rules of the team itself.

• Mandatory observance of these rules is obligation of each team member, just as performing working process is.


57

Therefore, we observe the project team form. In an HPO, it emerges out of the employees from various hierarchical levels of the old organization.

In a team of parallel organization the decisions are made by consensus. It proved to be the best manner of decision making in a democratic organization. The consensus is reached when all team members:

• feel that they have been listened to; • believe that the discussion has been open and honest; • are convinced that they have faced with and discussed all important options

and information; • personally feel that they are “in possession” of the decision, as if they alone

have made it and then they will actively support it.

SS44

SS44

Parent / Parent / ChildChild


““MyMy””

TopTopLeadershipLeadership

TeamTeam““OurOur””

Management Management TeamTeam


ParentParent

““MyMy””Parent / Parent / ChildChild

ChildChild


NOG Management /NOG Management /Task TeamTask Team SS3+3+

NOG NOG LeadershipLeadership

TeamTeam




SS3+3+

SS3+3+

AdultAdult

AdultAdult

AdultAdult

AdultAdult

HIERARCHYHIERARCHY

PAR

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SS44

LEADERSHIP FORMLEADERSHIP FORMLEADERSHIP FORM

MidMid--levellevelLeadershipLeadership

TeamTeam

PARALLEL ORGANIZATIONPARALLEL ORGANIZATION

Source [14]

Figure 7. - Leader’ teams at all levels on the HPO

Finally, we come to the final form S3+, which will in certain time “slide” into the final form of leader’s organization S4.

4. HPO LEADERS

The best way to obtain an answer about an HPO leader would be by doing researches on leaders of effective companies. One of such five-year researches


58

(see [4]) has been published. But, let’s first give data on a sample: out of 1,435 companies from the Fortune 500 in the period 1965-1995, by using the process of selection, it was found that there were companies which had index of growth at least three times greater than the New York Stock Exchange average, and they maintained it for at least 15 years. Such companies are called great companies. They had to be good companies that had rate of growth of shares at least 1.25 times greater than the Stock Exchange rate. They had to be the companies already existing and not the newly established ones, while their success should have not stemmed out of the economic branch success. The final number of such companies was 11, with an average growth of 6.9 times greater than the average growth of American economy. A dollar invested in these companies in 1965 after 30 years was worth 471 dollars, while investing in general markets would have rejected 56 dollars. In the paper they were compared with good companies of similar size and age, in the same branch and with similar products and services. Also, a group of unstable companies was introduced having some similarities but which had a distinctive peak in growth and fell fast, with the cycle that lasted less than 10 years. It is important to notice that with great companies the criterion was to further maintain the growth of shares at the time of researches.

Table 1. – The companies taken from “GOOD TO GREAT” research

GREAT COMP. COMPARED COMP. VANISHED COMP.

Abbot Upjohn Burroughs

Circuit City Silo Chrysler

Fannie Mae Great Western Harris

Gillette Warner-Lambert Hasbro

Kimberly-Clark Scott Paper Rubbermaid

Kroger A&P Teledyne

Nucor Betlehem Steel

Philip Moris R.J.Reynolds

Pitney Bowes Addressograph

Walgreens Eckerd

Wels Fargo

Source [4]

The greatest shock for researchers was that all 11 great companies had CEO leaders which were of the “same kind”. The leaders leading great companies are called the level 5 leader.


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• LEVEL 5: LEVEL 5 LEADERHe builds effectiveness through paradoxical mixture of personal modesty and professional strength

• LEVEL 4: EFFECTIVE LEADERHe leads powerfully insisting on vision and high performances.

• LEVEL 3: COMPETENT MANAGERHe organizes people and resources effectively and efficiently.

• LEVEL 2: CONTRIBUTING TEAM MEMBERHe is effective in a group and dedicated to the team work.

• LEVEL 1: HIGHLY CAPABLE INDIVIDUALHe is productive, talented, educated, skilled and with good working habits

Source [4]

Figure 8. - Level 5 leader and other levels

Level 1 includes individual competency, level 2 the team work skills, level 3 a competent manager, level 4 a traditional leader. Level 5 contains all from the preceding levels along with an “extra dimension”: paradoxical mixture of personal modesty and professional will. A level 5 leader directs his ego further from himself setting as his higher goal the creation of a great company. This does not mean that he is not ambitious, he is actually very ambitious, however, his ambitions are directed towards the institutions and not towards his own self. An interesting dual character of personality is reflected with them: modest, but willful, humble, but fearless. They as a rule do not speak about themselves but about the organization. The researches show that they as a rule come “out of home” contrary to the leaders of the compared and vanished companies. The compared companies have engaged six times more outsiders for the CEO than HPO have done. Also, compared to them a level 5 leader appoints his successor at quite early stage and trains him for a successor. They will stoically and uncompromisingly do all that is necessary for the existence and growth of their organization. They are fanatically infected with producing results. When they speak about their success they say that they have been lucky. When they speak about failures they blame only themselves. Level 4 leaders do the very opposite, for their failures they blame bad luck, while they ascribe a success to their credit. I would like to notice once again that level 5 leader is not an ideological guideline, but an empirical fact.

After publishing the book [4], Collins (see [5]) has gathered a great base of level 5 leaders from all spheres of society. He has concluded that in human population there are much more of such leaders than of egocentric ones who are more represented in media. Our culture and media like leaders who are greater-than-life, and those quiet, modest and effective ones. The problem is not in shortage of the level five leaders. They are actually everywhere around us. The dynamic changes expected in this century will condition our attention


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towards them so that economy and society could successfully cope with changes, because they are the key to overcoming them effectively. The task of society will be to identify, cultivate and develop them.

Effectiveness of a level five leader in the 21st century will be founded (see [3]) on the following assumptions:

1. Leaders should define the inside and outside of an organization according to firm organizational values and visions and not according to traditional limits and restrains. They must keep values in order to stimulate progress.

2. Leaders should build mechanisms of bonds and obligations based on freedom of choice, and not rely on systems of coercion and control. Democratic values and democratic system of an organization appear as inevitability of making choice.

3. Leaders should accept the fact that the right leadership is in reverse proportion with leadership based on power. The right leaders of the 21st century are only those whom people follow when they are free to do that.

4. Leaders should encompass the reality in the whole of its complexity. All barriers that have existed so far must no longer exist for leaders of the 21st century; all barriers should become archaic.

Effective leaders, according to Bennis (see [1]):

• Define mission of an organization as a framework for performing activities. • Create flexible environment in which people are not only esteemed but also

encouraged to achieve their full potential, where everyone is treated equally. • Shape corporate culture in order to replace conformity, obedience and

mechanical behavior with creativity, autonomous and continual learning. • Transform organizational forms from a rigid pyramid towards the fluid circle,

towards the developed network of autonomous units. • Encourage innovating, experimenting and risk taking. • Anticipate the future by reading the present. • Make new bonds within organizations and new connections within

collaborating teams. • Establish new alliances outside their organizations. • Constantly study organizational forms of both their own organizations and

those in the environment. • Identify weak links and replace them. • Think globally rather than nationally or locally. • Identify and respond to new and unforeseeable needs of collaborators. • They are proactive, not reactive, and comfortable towards ambiguity and

uncertainty.

The present-day leaders are a basis for democratic development of today, in which the power is distributed and not concentrated. The first leader, a level 5 leader, will succeed in responding to changes of this century. It is crucial that he


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accepts the human nature as such and to respond to it. The emotional intelligence has for the first time been developed in this direction.

5. GOOD IS ENEMY OF GREAT

We will proceed in explaining the “Good to great company” (see [4]) concept. We have already shown that a particular type of leadership and leaders is required for a company to become great. This is a level 5 leader. A level 5 leader is major but not the only component of a great company. Other components are in what a level 5 leader does, and this will be shown hereinafter.

First who…then what. Also, the (non-)importance of plans in great companies has unexpectedly been discovered. Researchers have expected that the first step towards the road to a great company is in establishing new directions and strategies for the company, and only then, based on them, the people would be lead. However, they have discovered a completely different thing. Great companies first start by engaging the right people and then by making plans. If one starts with “who” rather than with “what”, then adapting to changes will be easier. If the right people are employed, the problem of motivation and management becomes easier. There is no great company with wrong people. The old syntagm that the people are the most important value of a company is not valid in great companies. The right people are the greatest value. On the road leading to changes, if the company is imagined as a bus, it will take the right people on the bus, and throw out the wrong ones and then place the right people into the right seats. Great companies will assign to the best people the jobs with greatest chances, and the jobs burdened with greatest problems. Leaders of great companies are rigorous, but not merciless. The compared companies had much more dismissals then the common ones. The manner of work in the compared companies is a “genius with thousands assistants”. In them only a head man is of crucial importance while all the others are consumer goods.

Confront the brutal facts. For great companies the data are more important than desires. Great companies constantly compare their high performances with brutal facts form the environment. The level 4 charismatic leaders often cannot stand the picture from the environment not coinciding with their view on own successfulness. And indeed, the charisma is rather a shortcoming than necessary component of successful leadership. The climate in great companies is such that the truth is always heard. Faced with brutal facts, the great companies never loose faith. This is a so-called Stockdale paradox. Stockdale is an admiral in the American Army and was the top rank officer captured by Vietnamese in the Vietnam War. He was confined for 8 years under very severe conditions. His behavior was brave and inspired other captives. After being released he was one of the most decorated American officers. His story is well known saying that the first to give up hopes in prison were optimists – those who expected that they would be released soon or during some of the holidays. On


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the other hand, the pessimists were none better either. Based on this, an effective model of survival is made: keep faith that you will withstand until the end whatever the difficulties are, AND AT THE SAME TIME face all brutal facts of reality, whichever they are. This is the Stockdale paradox. In great companies the leaders say that the most effective collaborators are those who have been war prisoners.

Level 5leadership

First who…Then what

Brutal facts

Hedgehog concept

Culture of discipline

Technology accelerators

DISCIPLINED PEOPLE DISCIPLINED THOUGHTS DISCIPLINED ACTIONS

BREAK-THROUGH

BUILDING

Source: [4]

Figure 9. - “Good to great” concept

The hedgehog contept. It is a well-know fable in which a cunning fox tries in many ways to eat a hedgehog. The hedgehog defends himself always in the same manner – he has his spines and the fox can’t do him any harm.

What you can be the best in the world at

What drives your

economic engine

What you are deeply

passionate about

Source: [4]

Figure 10. - The Hedgehog Concept


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The concept of a hedgehog is a simple concepts deriving from crystal clear understanding of the following three circles:

1. In what matters can you be the best in the world (and, equally important, in what you can’t)? The aim is not to be the best or a strategy how to be the best, it is awareness in what matters one could be the best. The great companies will change their major activities uncompromisingly if they understand that in some other activity they can be better than in those they are in.

2. What starts your economic engines? The great companies have spectacular results in very non-spectacular industries. The central point is that every great company understands what is crucial in its economic development and builds a system based on this understanding. As a rule, this is only one denominator, because it better illustrates the essence than a group of dominators. With great companies this may be: profit per employee, profit per buyer, profit per visit of a buyer, profit per local population, profit per level of risk, profit per brand, and profit per geographical region.

3. What is your deepest passion? The great companies, contrary to the compared ones, are not in business only to make money. This is for them in second place. For them it is much more important to like their business, to feel tremendous passion towards it.

This process of uniting three circles into one is not fast. It has to run for a long time. In the researched companies it has ran for 4 years. The compared companies are rather like foxes. They commence many deals and they do them by storm.

A culture of discipline. Great companies have discipline culture. This is not a tyranny. This is an organization with high level of discipline and high level of entrepreneurship simultaneously. The discipline culture is not stemming out of a system but people. The culture in great companies is based on freedom and democracy, while insisting on the right people and crystallizing hedgehog concept will enable the people to be managers to themselves. With disciplined people the hierarchy is not required, the “red tape” is not required, extensive control is not required. With unstable companies the success has also been based on discipline. Actually, on the discipline of a tyrant the growth would be spectacular, and after the tyrant would leave, the discipline would quickly be lost and the fall would be dramatic. Great companies make a list of jobs they will not perform, make budget items they will by no means finance. All this based on the hedgehop concept, however attractive it may appear, will neither be done nor financed.

Technology accelerators. Great companies think in a different way about the role of technology. They never take technology as a prime motive of transformation. On the other hand, they are pioneers in applying carefully chosen new technologies. If new technology could be used according to hedgehog concept it will be used immediately, and if not, it will not be even noticed. Great companies use technology as an accelerator of development, they are not a creator of


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development. Effectiveness and high performances of great companies are merit of a level 5 leader. Average results of the compared companies have derived from failures of their managers, and because of errors of technologies. An effective approach of great companies is “crawl, walk, run”, even in times of rapid and radical technological changes. 80% of the interviewed level 5 leaders have not placed technology among the first 5 factors of success. However, great companies are, when compared to other companies, in many ways pioneers of new technologies.

Table 2. - Companies from the “BUILT TO LAST’ research VISIONARY COMPANIES COMPARED COMPANIES

3M Norton

American Express Wells Fargo

Boeing McDonell Douglas

Citicorp Chase Manhattan

Ford GM

General Electric Westinghouse

Hewlett-Packard Texas Instruments

IBM Burroughs

Johnson&Johnson Bristol-Mayers Squibb

Marriot Howard Johnson

Merck Pfizer

Motorola Zenith

Nordstrom Melville

Philip Morris RJR Nabisco

Procter & Gamble Colgate

Sony Kenwood

Wal-Mart Ames

Walt Disney Columbia

Source: [6]

The flywheel and the doom loop. Although outsiders often think that a change of a company from good to great is a miraculous moment, this does not coincide with the reality. For those inside reaching high performances represents a conditioned development process. They are often not even aware of how good their results are. By building and rounding a concept the circle closes and this circle starts to revolve. Once, twice …five hundred times. The compared companies actually like revolutions and dramatic programs of changes. Such approach does not provide results and as a rule fails. Great companies have no names for their transformations. Many of the level 5 leaders have claimed that they have not been aware of great transformations until they have turned back. For great companies there is a simple truth: great power lies in the possibility of


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continual improving and realizing results. The difference in managers and acquisitions may be noticed between the compared and great companies as well. The compared companies often want to make a great move forward by purchasing other enterprise or merging with it. This usually does not work. Great companies first make a move forward, and then enter in purchasing or merging with others. They use managers and acquisition as a flywheel.

General conclusions by Collins and Porras are that good is the greatest enemy of great. This is a major reason why so little of good becomes great. We should not be satisfied with good, we should strive towards great.

Another Collins’s (see [6]) research is dedicated to the visionary companies, namely companies which are:

• institutions in their industries, • widely known and recognized by respectful businessmen, • have left a visible mark in the world we live in, • have had several generations of leaders, • have gone trough several production life cycles (or cycle of services), have been established before 1950.

The first to be noticed is a negative correlation between a charismatic leader and building visionary company. The greatest creation of a visionary company is the company itself. Visionary companies have freed themselves from the “tyranny of OR” and work according to the principle “ingenious AND”. They are able to encompass differences in many dimensions simultaneously. They do not choose between changes OR stability, they have changes AND stability. Profitability is a condition for long-lasting existence of a company but it is not a key to its existence. The key to existence is keeping higher values of reasons because of which a company exists during the course of time. A basic ideology of a visionary company is composed of basic values and visions or purposes of existence. The ideology of the Disney Company is, for instance: bringing happiness to millions of children. One of the leaders of a visionary company has emphasized that an organization has to accept changes of ever changing environment, has to be ready to change all except for its major convictions moving it forward, that the only organization’s “sacred cow” is a basic philosophy of business running. That’s how visionary companies operate: preserve the core / stimulate progress. There are five categories of specific methods for preserving essence and stimulating progress:

1. Big hairy audacious goals (BHAGs). This is actually surrendering to challenging, audacious and often risky goals and projects through which visionary companies direct their efforts and stimulate progress. The BHAG has to be a goal, has to be outside comfortable zone, has to be isolated for employees, has to be consistent with the ideology of a company and must not be lonely, but has to be continued with other BHAG as well.

2. Cult-like cultures: Visionary companies are great places to work in for those employees fitting in the major ideology. Those who do not fit in it are rejected as a virus, in order to preserve values. Visionary companies are not soft, on the contrary, they have standards, they are elitist, and they


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often have their own language, which may sound unfamiliar to those outside the elite. Workers fitting in the ideology are the workers who may be entrusted with a high operative autonomy.

3. Try a lot of stuff and keep what works: As a rule, in visionary companies the best moves forward are not the fruit of the detailed strategic planning, but rather of experimenting, trials and errors and sometimes even of an accidental case. High level of actions and experiments produces new unexpected progress roads. This is evolutionary progress stimulator, while the BHAG is revolutionary one.

4. Home-grown management: Visionary companies promote from the inside; only people who have spent considerable amount of time in a company climb to top level positions. In such way a company maintains is values. In 700 years of a combined history of visionary companies there have been only four cases where general directors have come outside the company. In the compared companies, 22.1% of general directors have been outsiders.

5. Good enough never is: Visionary companies are in a continual self-improvement process aiming to be better and better both today and in the future. They stimulate the process by setting top standards to themselves. The right question the visionary companies ask is whether this is appropriate for us, and not whether this is good for us.

The essence of visionary companies is not in the existence of written visions and values, because the compared companies also have this, but in transforming essential ideology, along with eagerness for progress, into concrete assignments in an organization: goals, strategies, tactics, behavior, payment system, bookkeeping – in everything a company does. All that company does is to be aligned with basic values.

PRESERVE

•Core Values

•Core Purpose

CHANGE

•Cultural & Operating Practices

•Specific Goals & Strategies

Source: [6]

Figure 11. - Concept “built to last” The researches on the long-lasting have been carried out prior to the researches on greatness. However, Collins is of opinion that the good to great concept precedes the built to last concept. The first concept produces the high performance results, while the second concept shows how the high performance


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results become long lasting. For a great company to become long-lasting one it should take over the built to last concept and strive towards great, towards the best. It is not more difficult to build something great than to build something good.

6. PERSONAL LEADERSHIP

Seven habits of highly effective people (see [8]) is a standard for training potential leaders in the USA. The first one is also a basic training because it is focused on building leader’s personality.

Our character is basically composed of habits. A habit is defined as a set of knowledge, skills and wishes. Out of 7 habits those first ones are directed towards building effective personality while the rest towards building effective social relations.

Public

victory

Privatevictory

INDEPENDANCE

DEPENDANCE

INTERDEPENDANCE

3. PUT FIRST THINGS FIRST

2. BEGIN WITH THE END IN MIND

1. BE PROACTIVE

6. SYNERGIZE

5. SEEK FIRST TO UNDERSTAND, THEN TO

BE UNDERSTOOD

4. THINK WIN-WIN

7. SHARPEN THE SAW

Source [8]

Figure 12. - Seven habits of highly effective people

Habit No.1: Be proactive. This is a personal vision principle. The only vision we have about ourselves is coming from the so-called social mirror, namely from the people around us, and our image may often be deformed. Often, our response to some stimuli may be such that we cannot comprehend it later. There is a well-known story about Victor Frankl, a prisoner of the Nazi death camp. Frankl was a psychoanalyst belonging to the Freud’s school and was suffering in the camp just like all others. One day, standing in front of a gas chamber, he was thinking how his lectures to students would be after the War. Soon, he alone could decide how things that affected him would really affect him. Frankl projected himself into other circumstances and suddenly he had much more freedom than even his jailers did who, like others, admired him. Frankl survived and his future works were based on a postulate, not at all close to Freud’s one, according to which a man had freedom to choose between a stimulus and response. This is a proactive model. The freedom of choice should


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be based on our conscience, free will, imagination and self-confidence. A proactive man takes initiative. The proactive approach may even be felt in everyday speech of such man. What a proactive man does is spreading his proactive focus based on positive energy. A man’s circle of influence is generally smaller than the circle of anxieties. Proactive people expand their circle of independence, namely what they actively control, thus reducing the circle of anxieties, namely activities over which they don’t have direct control.

Habit No.2: Begin with the end in mind. This is a personal leadership principle. The exercise explaining this habit is the following: imagine that several decades have passed from the present moment and imagine being amongst known people, but in an unknown place. Now imagine that you are at your own funeral. Four people describe what kind of person you have been, one of them representing family, the second friends, the third colleagues and the fourth representing neighbours. Could you say what would each of them say? Could you say what would you like them to say? The point is in that you always have in mind the very goal and vision that you would like to realize regardless of difficulties you come across. This principle is based on a presumption that all things are created twice: first creation is mental - in head, and the other one is physical - in life. Covey suggests that everyone should write his own Constitution which will be his own vision, his mission and guiding principle. In order to achieve this, one should look deeply into himself, into a center of his circle of influence and find basic principles there. Principles are like a compass showing your present direction. The one who in the center finds: himself, his spouse, family, money, work, property, satisfaction, friendship, hostility, or church, he is wrong, he is not a man based on principles. For such visualization to be possible, a man must be able to use the whole brain, especially its right side.

Habit number 3: Put first things first. This is personal management principle. The first habit says you are a creator, you are responsible for yourself. The second habit is a mental response of our proactivity, based on imagination and consciences. Third habit is physical creation, personal fruit, practical fulfillment of the first habit. In this habit the know time matrix is learnt and K2 quadrant is explained, already explained. In order to become K2 self-manager, Covey suggests the following activities:

1. The first assignment is to define key roles, such as for example: personal role, role of parent, as of spouse, of a member of some society or association.

2. The next step is to set goals for each of these roles, namely important results we wish to accomplish.

3. Third step is making schedule of obligations to be fulfilled to unite these roles and goals.

4. Daily adapting of obligations: daily planning on weekly base is suggested. While planning one should see which of the obligations may be delegated as well.


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To proceed with habits which will bring us public victory, the interdependence paradigm is to be explained first. From the first three habits a man has moved from the state of dependence into the state of independence. However, a man is not a wolf, he is not a lonely individual. He is in society and he must, out of these relation and dependence, also realize a progress. Emotional intelligence and emotional approach are the key of such relations.

Habit number 4: Think win-win. This is interpersonal leadership principle. The author of this book has been asked by a manager to help him in his work with people. He has told him that they are selfish and not willing to work in a team. Covey has gone to the meeting. The manager has opened the meeting and asked: “why don’t you work in a team, if we work in a team we will have much more money”. He has told Covey that the present consultant would show him how he has stimulated team work. Then he has taken out a poster showing racing horses on a start line. Photographs of each collaborator separately have been attached to horse’s heads and on the goal a photograph of Bermudas glued. The manager has actually not understood that he has not awarded the team work but a success of one and the failure of other collaborators. The habit of an effective interpersonal leadership is to think victory/victory. This is not a technique, but philosophy. In fact, this is a philosophy victory/victory or otherwise there is no contract. This is a belief that there is an alternative, which is neither my way nor your way. This is better way, more effective way. Other paradigms are: victory/defeat, defeat/victory, defeat/defeat, and only victory. When it is not possible to reach an agreement from which all benefit, then it is better to withdraw with honor and proceed to the option that there is no contract. A high degree of deference and courage is required to come to the level victory/victory and, if it is based on principles, it is fundamentally important for a success in life.

Habit number 5: Seek first to understand, then to be understood. This is empathic communication principle. Empathic listening is the essence of understanding feelings of another being. When we listen to the others it is not important only to listen but it is important also to feel. Even a physician does not give a prescription before he makes a diagnosis. People often link their feelings to objects, and while speaking, they speak about objects and not feelings. In order to understand this, there are 4 development phases of “drawing” feeling out of the real context of an interlocutor’s works:

1. Repeating context. 2. Paraphrasing context. 3. Reflecting feelings. 4. Paraphrasing context and reflecting feelings.

When you understand the interlocutor … then he has to understand you. This is critical for the victory/victory solution. It is suggested that in the business world you should always have an effective presentation. Its preparation must always precede its performance. The more time you spend in preparing your exposition or presentation, the better chances you have in being understood. My


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experience as a leader tells me that many problems are soluble only and exclusively by improving communication.

Habit number 6: Synergize. This is a creative cooperation principle. When Winston Churchill promised to the British the blood, sweat and tears in the war with Nazis, many thought that these words came into his mind in that moment. Churchill said later that he felt as if he prepared himself for that moment the whole of his life. Practicing all the above mentioned habits prepares us for such habit. Synergy is the highest activity in life – a real test and manifestation of all other habits taken together. By a complete joining of habits together new alternatives are created – results may be miraculous, something that has never existed before can be created. Synergy is vital in communication. The synergic communication is a real communication based on the victory/victory postulate. It is the result of high level of confidence and cooperation. The medium level of communication is respected communication, based on compromise, and the lowest level is defensive communication, based on defeat/victory or victory/defeat communication. Synergy is 1+1=3, and maybe even 500. The result of a compromise is ½, the defensive result approaches to 0 or is pure 0. Synergic communication awakes creativity and points at new alternatives. Let’s imagine two colleagues in an office, one wants to open a window while the other objects. Synergic communication would be the knowledge that one wants to open the window because he lacks fresh air, while the other objects claiming the wind would take his papers from his study. The possible results are to open the door, open the window in a side room and put something heavy on papers, or anything else. The essence of synergy is evaluating risk, actually evaluating mental, emotional and psychological differences between people.

Habit number 7: Sharpen the saw. This is balanced self-renewal. If we sharpen the saw we shall cut woods easier. If we renew ourselves the life will be easier. There are 4 renewal phases:

1. physical, based on exercising, nutrition, and managing stress. 2. spiritual, based on searching for deeper inner goals, meditation, bonds with

nature. 3. mental, based on reading, writing, planning and thinking. 4. social/emotional, based on serving, empathy, synergy, and inner security.

Practicing Covey’s 7 habits is a basis of each effective leader and each effective man. When combined, they enable us to feel great power in our own selves.

7. ELASTICITY

We have seen that the two esteemed scientists, Collins and Covey, have mostly found their inspiration for leadership in survived war prisoners such as professor Frankl and Admiral Stockdale. An article from the HBR (see [7]) gives the right picture of what is the essence of these two men and what should effective leaders have. And that is elasticity.


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The characteristics of elasticity are:

1. Capacity of facing and accepting reality. 2. Ability of discovering the essence in certain aspects of life. 3. Possibility of improvising.

The elasticity is necessary both to leaders and high performance organizations. When we are aware of reality we get ready to respond in such way as to survive. Searching for the essence means discovering values that are basis of our existence. Improvising is an art of solving problems. The elasticity is one of the most important topics in business circles today. More than education, more than experience, more than training, the elasticity level is a determinant of who succeeds and who doesn’t. This is true in a fight with a cancer, this is true on Olympic Games, and this is true in an office. Elastic people have ability to construct their future out of their today activities.

The Morgan Stanley is a well-known investment bank. It was the greatest premises lease-holder in the New York World Trade Center, demolished in the terrorist attack on 11th September 2001. The Company had 2,700 workers in the southern tower on 22 floors, between 43rd and 74th floor. The first airplane hit the northern tower in 8:46 hrs, and in 8:47 hrs, the Morgan Stanley commenced evacuation. 15 minutes later, when the second airplane hit their tower, their premises were completely empty. The airplane hit directly in the Bank premises…

In 1993 there was the first terrorist attack on the WTC and the Bank management, which showed such elasticity 8 years later, were aware that they work in a symbolic center of American power and that it is vulnerable to terrorist attacks. They started to develop a program of readiness to terrorist attacks, for which the elastic vice-president Rick Reskorla, highly decorated Vietnamese veteran, was responsible. By exercising military discipline, he ensured that people would be trained to cope with a catastrophe. He managed to make the Morgan Stanley ready for the gravest reality. And not only the employees but technology and data as well. The data saving system was made on several locations and all data were saved.

On 11th September the Bank lost only 7 men out of 2,700 workers. Rick Reskorla was one of them.

8. HOW TO BECOME A GREAT LEADER?

We have got familiar with the leader’s basis model (see [15]), derived from the researches of 25,000 leaders. Zinger and Folkman found that the following makes a basis, foundation of a leader:

1. character, 2. personal capacity,


72

3. focus on results, 4. interpersonal skills, and 5. leading organizational changes.

The main conclusion of the researches is that the leadership paradigm is wrongly presented. We don’t need a wide range of programs and mass teaching of leaders, but what we need are great leaders. We don’t need to develop leadership, but to produce great leaders. Great leaders make great difference.

Impact of Leadership Effectiveness on *Perceptions of Customer Satisfaction

Perc

eptio

ns o

f Cus

tom

er

Satis

fact

ion

PCTL

More effective leaders have more satisfied customers.

39

49

68

0

10

20

30

40

50

60

70

Bottom 20% Middle 60% Top 20%

* Results from a large high technology company

Source: [15]

Figure 13. - Leaders effectiveness and consumer’s satisfaction It is interesting to notice that the results of researches show that only great leaders make great difference. The following graph shows that upper 30% of leaders according to their successfulness have great deviation in results of researches on their successfulness. The first big jump is noticeable in the first third of the researched population. The second third of the researched “good leaders” shows that a good leader, wherever on the scale from 30 to 60% of successfulness, is estimated to have medium results. Only the last third of leaders is estimated as great leaders.

Impact of Leadership Effectiveness on *Employee Satisfaction/Commitment

Results from a large high technology companyLeadership Effectiveness Percentile

Empl

oyee

Sat

isfa

ctio

n

90th

-10

0th

80th

-89t

h

70th

-79

th

60th

-69

th

50th

-59

th

40th

-49

th

30th

-39

th

20th

-29

th

10th

-19

th

1st -

9th

4.8

4.6

4.4

4.2

4.0

3.8

3.6

3.4

3.2

Poor LeadersCreate

Dissatisfaction

Good Leaders Have an

Adequate Impact

Great LeadersMake a Great

Difference

Source: [15]

Figure 14. - Leader’s effectiveness and satisfaction of collaborators


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One becomes a great leader when what is already powerful and strong in him is improved. There lies the essential difference between a good and a great leader: a good leader develops the competencies in which he is weak to an average level, while a great leader develops the competencies in which he is above average and brings them to perfection. The philosophy of effectiveness is in intensify competencies in which you are strong.

1 2 3 4 5

P

O

N

M

L

K

J

I

H

G

F

E

D

C

B

A

Would these two competencies improving have dramatic impact on leader’s effectiveness?

Source: [15]

Figure 15. - Classic approach: improving weak competencies Classic approach in work on weaknesses is based on mediocrity and produces mediocrity. The essence of this approach is in improving competencies in which a leader is below average.

1 2 3 4 5

P

O

N

M

L

K

J

I

H

G

F

E

D

C

B

A

Would these two competencies improving have dramatic impact on leader’s effectiveness?

Line of mediocrity

Source: [15]

Figure 16. - Modern approach: improving strong competencies


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Modern approach is based on superiority and it is essentially oriented to building effective leaders.

Another data obtained from researches provide us interesting information on relation between the strong competencies and effectiveness of leaders, based on assessment of their collaborators.

Relation of strong competencies and effectiveness

34

6472

8189 91

0102030405060708090

100

Average Percentile

Score

0 1 2 3 4 5

Number of Strengths

Source: [15]

Figure 17. - Dramatic rising of effectiveness by increasing strong competencies

As evident, already one competency in which we are strong increases our effectiveness to even 64%. Only 3 competencies in which we are strong give us assessment of effectiveness of over 80%. There are 4 explanations why the competencies are linked:

1. Strength in one competency creates powerful “halo effect”. 2. In the development process of any competency an individual develops also

other, linked skills. 3. Self-confidence of an individual is raised when any competency or skill

produces success. The success in the development of one competency raises confidence in trying to develop others as well.

4. The level of aspiration grows when people succeed in one dimension. This encourages them to set new goals at higher level and new ever more demanding assignments.


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It’s interesting to mention that the combination of interpersonal skill and focusing on results is the best one considering that 66% of great leaders possess these competencies taken together.

It should be mentioned that the approach of improving superior competencies is not valid in case when a leader possesses a fatal shortcoming. Extremely low score in one competency represents a fatal shortcoming and if people who have it improve their results in this competency, and their collaborators will assess that the total score of the assessed individual has dramatically increased.

Focus on weaknesses is good when …

Fatal flaw

1 2 3 4 5

P

O

N

M

L

K

J

I

H

G

F

E

D

C

B

A … people have fatal flaws

Source: [15]

Figure 18. - Fatal flaws

There are five fatal flaws granting failure in leadership:

1. Lack of ability to learn from mistakes. 2. Lack of interpersonal skills and competencies.

2.1. Cold, rude, arrogant, and egocentric executive 2.2. Lack of basic social values and good manners

3. Lack of openness to new and different ideas. 4. Lack of responsibility for (un)achieved results. 5. Lack of initiative.

By observing these five behavioral frameworks the following facts have been crystallized:

1. All fatal shortcomings are extremely evident, everyone near leaders feels impact of such behavior.

2. Every fatal shortcoming is primarily an inability to do something. These are not ineffective actions but ineffectiveness deriving from non-acting.

3. All fatal shortcomings are rooted not only in not having intellectual but not having emotional intelligence.


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Eliminating these shortcomings in their core provides increasing emotional intelligence of an individual. Technically, a correct and comprehensive feedback should be organized and its results used.

A great leader (see [15]) emerges from someone who, having natural gifts, and on the basis of practice, learning and experience, develops his gifts to perfection. Other knowledge deriving from this research is:

1. When compared with good leaders, the great leaders make great difference.

2. An organization may have many good leaders. 3. Goal is too low in development of leadership competencies. 4. The relation between the improved leadership and raised performances

does exist, and is stronger than the linear one. 5. A great leader has several “basic blocks” of leader foundation. 6. Leadership is crucial and critical element in success in changes. 7. Not all components are equal. Some distinguish good leaders from great

leaders, while others don’t. 8. Leader’s competencies are tightly linked. 9. Effective leaders have different personal styles; there is no one right

leadership manner. 10. Effective leadership practice is different for each organization. 11. The key to developing great leaders is in intensifying strong leader’s

competencies. 12. Strong combination produces almost exponential positive result. 13. Having no weaknesses is not the cause of great leadership. 14. Great leaders have no great weaknesses. 15. Fatal shortcomings have to be corrected. 16. Attributes of leadership are often corrected in non-linear and non-

standard manners. 17. One is not a leader by birth, one becomes a leader. 18. Leaders may improve their efficiency by self-confidence. 19. Organization and immediate superiors may offer significant contribution

in development of a leader. 20. The quality of an organization often may not be better and is not better

than the quality of a leader at its head. 9. CONCLUSION Firs of all, it is necessary to underline the necessary change of paradigm in the philosophy of leadership. The new philosophy is required because of the new convictions of individuals and organizations related to the nature of people and their relation towards the jobs, primary source of motivation, distribution of knowledge and creativity in an organization based on decision making and related to designing and assigning tasks. An organization has to change its culture from an “industrial model” with typical autocratic leadership towards a “network talent model” with participative, democratic leadership.


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The leadership philosophy is a guidepost for the nature of people, their motivation, distribution of knowledge, creativity, and responsibility. It should be a guideline in leading an organization. In the philosophy of HPO leadership the new thing is that it is based on full empowerment and alignment of all in an organization. It contributes to wipe out the hierarchic levels in an organization and to new motivation of employees. By considering an organization as something common to all in it, the full potential of its team members is released and leadership adopted by all collaborators in the organization. REFERENCES

1. Bennis, W. G.: On becoming a leader: The leadership classic updated and expanded, Perseus Publishing, 2003

2. Block, P.: The empowered manager, Jossey-Bass, 1991 3. Collins, J.: And the walls came tumbling down, Jossey-Bass, 1999 4. Collins, J.: Good to great, Harper Business, 2001 5. Collins, J.: The misguided mix-up of celebritiy and ledership,

conference report, 2001 6. Collins, J., J. I. Porras: Built to last: Successful habits of visionary

companies, Harper Business, 2001 7. Coutu, D. L.: How resillence work, HBR on leading in turbulent

times, HBS Press, 2002 8. Covey S. R.: The 7 habits of highly effective people,

Simon&Schuster, 1992 9. Emery, F.: Report on the Hunsfoss project, Tavistock, 1964 10. Hertzberg, F.: Motivation to work, Wiley, 1959 11. Likert, R.: The human organization, McGrow-Hill, 1967 12. Maslow, A. H.: Motivation and personality, Harper&Row, 1954 13. McGregor, D.: The human side of enterprise, McGraw-Hill, 1960 14. Pickering, J. W., G. S. Brokaw: Building HPO for XXI century,

unpublished participant text, 2003 15. Zenger, J. H.: The extraordinary leader: Turning good managers

into great leaders, McGraw-Hill, 2002

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